Oakland unlikely to file for bankruptcy

OAKLAND

Oakland City Council members may have privately bandied about the possibility of the city filing for bankruptcy, an unusually rare event in U.S. history. But none says it's likely, and Mayor Ron Dellums virtually ruled it out Tuesday.

"Bankruptcy is not a strategy that has been seriously considered, nor is it being pursued at this point," he said in a statement.

Council members Jean Quan, Ignacio De La Fuente and Pat Kernighan each said in interviews that although the topic had been mentioned as a possibility, it was not seriously discussed in their closed meetings. They also have not been briefed by staff members about the possible implications of entering bankruptcy.

"We've had no actual discussion of the topic," said Kernighan. "We do have a huge challenge in trying to close this budget gap, but we plan to do it by reducing our expenditures to match our revenue."

When Dellums presented his budget proposal in May, City Administrator Dan Lindheim estimated that there would be an $83 million deficit. But Gov. Arnold Schwarzenegger's state budget proposal would now take an additional $17.5 million in property and gasoline taxes from the city.

Municipalities that file for bankruptcy can use the action to renegotiate union contracts, as Vallejo, which filed for bankruptcy about a year ago, has tried to do with its police and fire unions.

But Oakland council members pointed out that the only contract the city now has is with its police union. All the other contracts - with the fire union, professional employees, electrical workers and others - are being negotiated.

"In our case, a bankruptcy would not have the effect that it had in Vallejo and other cities," De La Fuente said.

The unions bargaining with the city have agreed to give back 10 percent of their overall wages and benefits, Quan said. The police union, whose contract expires in 2010, won't agree to those terms, she said.

Nonetheless, Quan said bankruptcy is not a serious option.

"It would make no sense for us to go into bankruptcy if we're not trying to overturn our contracts," Quan said. "Right now, only the police union isn't cooperating."

The city's roughly $414 million budget for its general fund accounts for about 41 percent of its $1 billion annual budget. The general fund is the only discretionary part of the budget. The rest must be spent on special purposes, such as capital projects or grant programs.

Police services cost the general fund an estimated $212 million a year; fire services account for $103 million.

Sgt. Dom Arotzarena, president of the Oakland Police Officers Association, said the union has told the city it's willing to forgo a 4 percent pay increase scheduled for July in exchange for certain concessions from the city. He declined to elaborate.

"We see that us taking a 4 percent (pay) increase right now is a bad idea," he said.

The mayor's proposed budget would eliminate more than 200 police officers from a department of about 800 officers.

"If that happens, obviously crime is going to go up and people are going to get hurt," Arotzarena said.

But, George said, California's economic woes may change that. "It may become more common, in light of this recession, where you have the state of California and its deficits having a ripple effect on other cities," he said.